PESTLE Analysis: Aviation Industry
The world has changed greatly over the past decades. It is not a secret that modern ventures had to change their marketing strategy due to rapid changes in the business environment. Constant globalization and frequent technological progress altered the conditions for targeting the consumers and retaining them. Due to frequent development of technologies, almost all professional fields had experienced significant alterations. Such shift influenced not only the material world; the minds of consumers have changed as well. Nowadays, the industrial system is generating more goods than it was some years before. Stores, boutiques, online retailers propose a great variety of different commodities targeting the consumers of every age, gender, and cultural heritage (Choong, 2008). The toughness of competition is extremely high in all professional sectors making the marketers and managers to be as much up-to-date as it possible. Consumers, in their turn, are perplexed by such variety of goods making it almost impossible to choose ‘the right’ product. At the same time, the management of the companies, from the smallest firms to the biggest corporations, is racking their brains over the fastest and the most effective way of selling the goods to the clients.
Initially, aviation industry may be associated with luxury and comfort. It is even possible to suggest that it is a flourishing and highly profitable business due to constant demand. However, it is only a superficial perception of this industry, as there are obstacles encountered by all businesses today as well as certain specificities characteristic only for the aviation. With the boost of technologies the aviation industry experienced both positive and negative alterations. It became easier to target the consumers, though such shift of the paradigm brought additional drawbacks, like low trust of the consumers, increased demands to aviation services, new legislation, severe competition, and fluctuations on the oil market (Nelson & Drews, 2008). All these factors have a major effect on the aviation industry requiring improvements and changes in its marketing strategy.
A crucial factor that has immense impact on aviation is the political environment. The conditions in which the industry operates are highly regulated by both local as well as international laws. There are several reasons for this, where the most important one is the security issues. Despite all possible precautions, aviation is associated with high risks of crash, hijacking, and technical hazards. The safety of passengers and homeland security are paramount, which has to be regulated by the government. For instance, after the 9/11 attack, the governmental regulations regarding the aviation industry has changed (Larobina & Pate, 2009).
At the same time, when the government realized high demands for the aviation services, the state’s officials introduced the several deregulations and liberalization of the industry. For example, Open Skies agreements managed to increase international passengers and cargo flights, which increased the profits of the aviation industry (Meiter, 2015). Also, political environment in the home country and destination affects the aviation industry as well. One of the examples is the cancellation of flights to Syria due to the armed conflict in the country (Boxx, 2013). Also, the monopolistic tendencies in aviation industry made the government to increase pressure on the companies in this sector.
In addition to political environment, economic situation in the host country as well as internationally influences the aviation industry as well. According to experts, aviation industry still did not really recover from the tragic events of the 9/11 attack (Larobina & Pate, 2009). Additionally, severe economic recession in 2008 emphasized the dependence of the industry on the economic environment. During that time, the flow of passengers dropped, a lot of companies became bankrupt, and the relationship with the suppliers deteriorated (Guzhva, 2008). Another economic factor that affected the aviation is the fluctuations of oil prices, as during the Second Iraq War the prices for this product increased causing losses to the companies working in this segment (Kaynak, Kucukemiroglu, & Kara, 2009). Overall, as the researchers revealed, “declining passenger traffic, competition from low cost carriers, high aviation fuel prices, labor demands, and soaring maintenance and operating costs” have decreased the profits in aviation business and made the companies to reconsider their strategies (Flouris & Walker, 2005, p. 5). As it was admitted earlier, aviation industry is prone to monopolization, as it is extremely difficult to enter this business as well as to retain in it. It is difficult for both smaller companies and big multinationals because of increased competition with the low-cost airlines (Rubin & Joy, 2005). In the result, the majority of the modern aviation ventures tend to use mergers with other airlines in order to survive in highly competitive environment.
In the recent years, social changes also made the industries to reconsider their marketing strategy and the methods of targeting consumers. Aviation did not become exclusion from this rule. It was admitted that modern consumers are more demanding in terms of service, which led to the airlines having to reconsider their cost strategy and to improve the services (Nameghi, 2013). According to recent inquiries, the customers have become more economically minded, which resulted in decrease of passengers in business class (Weller & Webber, 2004); also, due to technological advancements, people tend to conduct their business remotely instead of flying to another country for meetings (Clougherty, 2000). Consequently, the profits of the companies that specialized in business and luxury sectors decreased, while creating more possibilities for the low-cost airlines.
The technological factor has affected the aviation industry significantly. First of all, it is important to admit that while aviation uses the technologies extensively, it is limited only to the distribution and tickets sales, as before any significant change is implemented in the aircraft, it has to undergo multiple testing procedures (Elliott, Hall, & Meng, 2013). Due to recent changes in technologies, the industry introduced the possibility to buy certain services online, like tickets or the choice of meals; introduce WiFi connection to the passengers, and make boarding more convenient and safe. Experts also advice the aviation industry to use the social media for promotion, targeting new clients, and researching consumers’ preferences with the possibility to satisfy them better.
It was partially mentioned that there are multiple regulations in the aviation industry. Legislation has a crucial impact on the industry. Recently, the quantity of lawsuits against airlines increased disproportionately from clients and the workers (Henry, 2013). Moreover, the regulators have become more scrupulous with the companies working in aviation, meaning that today they are very careful in the strategic approach to the airlines. According to experts, “the “double whammy” of increased regulation and more expensive lawsuits apart from the legal system becoming intolerant of delays, safety issues, and other aspects has only served to heighten the fears among the airlines as each and every move of theirs is being scrutinized” (Dobson & Piga, 2013, p. 1197). The liberalization and bilateral/multilateral international contracts that were supposed to improve the services of the aviation and increase the passenger traffic were only few positive changes in terms of legislation that helped the aviation industry.
While aviation does not maintain any production, it is still affected by the environmental aspect. Nowadays, clients have become more conscious in terms of environmental protection and sustainable living, which pushed many companies to acquire the same strategy. Aviation industry has introduced so-called “green flying” and become more environmentally conscious in terms of its impact on flora and fauna (Barton & Leonard, 2010). Corporate social responsibility of aviation companies have been under attack of environmentalists as well due to monopolization and relations with the suppliers (Aimable & Rosselló, 2009). It is recommended for the aviation to adopt new strategy on fuel utilization, safety, and sustainable use of certain products.
In addition such accessibility makes each client to observe the world through global prism enabling them to search for information on each firm, company, or product. It is important to remember that consumers are willing to participate in the creation of particular services developing and adjusting innovations to make their lives more comfortable. Being involved in the things vital for each person is a well known human’s nature. Therefore, it is recommended for the marketers in aviation industry to adopt the strategy of co-creating value, where the consumers will participate in improvements. Making potential consumers to co-create value is one of the most effective features in the marketing segment. At the same time, it is important to remember that co-creation value does not respond to physical development of particular product. In this case co-creation of value is a specific experience of a particular consumer who underwent it at a specific point of time and in a particular place.
In the traditional value creation process, the companies and their clients took the roles of production and consumption distributed respectively. Usually, products and services obtain particular value and markets exchange this value from the manufacturers to customers. In the conventional scheme of value creation, value is developed outside the market. Due to the trends of co-creation existing in the contemporary retail industry, the fringe between the companies and consumers is blurring. One of the conventional ways of creating business value with information is to manage risks in the business. Almost every company nowadays is trying to apply new strategies into the customer-relation process by involving their clients into the process of creating value.
References
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